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Why Debt Settlement Companies Are A Bad Idea

Most people burdened by heavy debt naturally want to do everything they can to pay off their creditors. What they don’t understand is that the credit industry has stacked the deck against ever getting the full amount paid off. Turning to debt settlement and consolidation companies may seem like an honorable way to try, but there are some things you should know about how they are designed to work — and why they rarely do.

Chicago And Charlotte Bankruptcy Attorneys

We are the debt relief attorneys of Hoard Law, P.C./The Hoard Law Group, Ltd., with offices in Charlotte, North Carolina, and Chicago, Illinois. We want you to know some things about the wrong way to get out of debt.

How Debt Consolidation Companies Work

Debt consolidation companies are often nonprofit organizations that promise to negotiate with your creditors to reduce the total amount owed on your bill. Many of these organizations are even funded by credit card companies, as a way to reduce the number of total debts discharged through bankruptcy.

When the organization has negotiated the lowest amount possible with each creditor, they work up a single monthly payment, including a hefty fee for “administration” costs. The payment plans are generally spread over a five year period. Many people are surprised to learn, however, that the consolidated monthly payment is higher than the total amount they were already paying each month to various creditors. While the plans may work to help a very disciplined individual get out debt by reducing their living standard for five years, they simply aren’t practical for a family trying to make ends meet month-to-month. A very high percentage of these plans fail within the first several months.

How Debt Settlement Companies Work

Debt settlement companies are not allowed to operate in all states. That should tell you something. These for-profit businesses are often started by wealthy entrepreneurs trying to take advantage of people who are already deep in debt. You will sign an agreement to pay the company a predetermined amount of money, based on the amount they promise to reduce from your total debt owed.

The company will not begin negotiating to reduce your debt until the full amount of prepayment is in your account, which may take up to a year. During the time you are building up your account, you will still be responsible for paying your monthly credit card bills as they come due. All creditors’ legal actions against you will continue, as well. If you stop making payments to the company and cancel the agreement, you may lose any or all of the money you have accumulated in the account. In short, you pay the company, but get nothing but promises in return.

Bankruptcy Is Your Only REAL Debt Relief

If you are unable to pay your monthly bills, talk to one of us before you talk to any of them. We are the bankruptcy lawyers of Hoard Law, P.C. We have years of experience helping families like yours break free of debt, without doing more financial harm to yourself trying to get there.

Contact Us

Call us at 704-954-8655 or reach us by email to schedule a consultation about how bankruptcy can help you get the fresh start you need and deserve.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.